Tax Transparency for Big Companies: Opposition Attempts to Bring Forward Changes Likely To Fail

The Tax Laws Amendment (Tax Transparency) Bill 2014 (the Transparency Bill), a Private Members Bill introduced by Labor MP and Shadow Assistant Treasurer Mr Andrew Leigh on 24 November 2014, which ".  .  . seeks to increase tax transparency by requiring the Australian Tax Office (the ATO) to publish data on what big companies have paid [in tax] . . ." is reported by the Financial Review as being unlikely to receive Government support and therefore likely to fail in the House of  Representatives. Finance Minister Mathias Cormann is reported as having:

What the Opposition Bill Does

Mr Leigh's Transparency Bill, according to the his second reading speech, provides: ". . . an opportunity for the Treasurer to act, rather than just give nice speeches with snappy slogans".

Effectively, the Bill, if enacted, would bring forward the implementation of previous Labor tax legislation (namely, the Tax Laws Amendment (2013 Measures No. 2) Act 2013 (the 2013 Act)). That legislation had required the tax commissioner to publish how much a company earns and how much tax it pays for firms that return a total income of $100 million or more.

However, as enacted, the 2013 Act applies to the 2013-14 financial year and, as a result, that information would not become available until late in 2015. Passing the Transparency Bill would have the effect of bring forward the flow of tax information that would be provided by a year; Mr Leigh arguing in his second reading ". . . so we can allow that information to flow immediately . . ."

The effect according to Mr Leigh being that:

The Transparency Bill is an attempt by the opposition to take the government to task in respect of statements made at the recent G20 Finance Ministers Meeting in Cairns (on 20 September 2014). In particular statement by the Treasurer Mr Hockey where he states:

In a Media release published to Mr Leigh's website Mr Leigh posts:

Effect of the Bill if Passed

If the Bill is passed and became law, the ATO would be required to immediately publish on its website information about the taxable income of Australian Companies, and the total income and tax paid for the 2012-13 financial year. The ATO can publish the information for public companies and private businesses.

The Government's Response

The Financial Review reports the reaction of the Government through its Finance Minister as being negative and not in agreement saying:

However, the Financial Review also indicates the Government's own plans for legislation in this area are not clear saying:

The Current State of Play

At the moment, publication of such information is voluntary and as the Financial Review indicates, in Australia there are only two mining companies, namely, Rio Tinto and BHP Billiton, who voluntarily publish reports about how much tax they pay in Australia and around the world. While, as the Financial Review also reports:

It should also be noted that the proposed laws affected by the Transparency Bill relate to Australian companies and would not have an impact on US based technology companies, the like of Apple and Google, which are the ones most criticised over profit shifting, being headquartered off-shore. To get to these companies the approach taken in some parts of Europe would be required, namely of specifically requiring these companies to make their tax information public.

As the Financial Review reports, the ATO is supportive of Australian companies being more transparent, citing second commissioner Andrew Mills as saying in a recent interview that: ". . . companies needed to be open about their tax affairs to avoid damaging their reputation. . . Sunlight is a great disinfectant, . . .”

Another aspect to the "transparency debate" is also the question of whether publication or making public the information is the best way to go. For example, as the Financial Review points out, the OECD prefers that such information stays in the hands of government (or the revenue agency, the ATO) rather than being made public; seeing collection of the information confidentially as a better alternative than risking not getting it at all.

It will be interesting to see if the former Labor legislation does come into operation at all, or if the current Federal Government brings in new legislation of its own. Certainly, as we have reported in previous posts (seeNot so Taxing Times: Senate Committee to Investigate Low-Tax Companies) tax avoidance and aggressive tax minimisation by corporations registered in Australia and multinational corporations that are operating in Australia is a concern, as are the amount of moneys being lost to the revenue as a result.

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• Tax Laws Amendment (Tax Transparency) Bill 2014 and supporting material as reported by the TimeBase LawOne Service.
• Tax Laws Amendment (Tax Transparency) Bill 2014 Second Reading Speech
• Mathias Cormann dismisses Labor push for biggest companies to reveal tax bills (Financial Review - 24 November 2014)
• Time for Abbott Government to back better tax transparency (Andrew Leigh MP's Media Release 24 November 2014)